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Business, 28.11.2019 06:31 rbriezz

Assume the risk-free rate is 4%. you are a financial advisor and your client has decided to

invest in exactly one of two risky funds, a and b. she comes to you for advice. whichever

fund you recommend she will combine it with the risk -free asset. expected returns are e(ra)

= 13% and e(rb) = 18%. volatilities are σa = 20% and σb = 30%. without knowing your

client’s tolerance for risk, which fund would you recommend? (hint: compute for sharpe

ratio)

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Answers: 1

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